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TD Indicators: Another Tool for the Trader’s Toolbox

I first learned of Tom DeMark’s indicators from Scott Reamer at Minyanville, an incredible community for students and teachers of trading and investing. Scott’s “Applied Complexity Analysis” inspired me to study Tom DeMark, Elliott Wave, Fibonacci analysis and more.

I’ve recently written a bit about Elliott Wave and Fibonacci analysis. Current developments in the stock market compel me to write a bit about a couple of DeMark indicators. I won’t attempt to explain all of the intricacies of the methodology (that would take much more than just one blog post – DeMark has written many books on the subject) only what it is currently showing us.

The chart below show the daily price movement of the SPY, the S&P 500 ETF:

As of Friday’s close, SPY had completed a 9-13-9 TD Sequential Buy Signal (this one did “recycle” but there is some debate about how to treat that). Typically, the “13” marks the buy signal but DeMark has said that a subsequent 9 (setup) after a 13 (countdown) can be the most powerful buy signal of all. Also notice that all three 9’s resulted in rallies, however short-lived.

This next chart is the weekly SPY chart:

Friday’s closing price completed a TD Combo Buy Signal. Traditional technical analysis also shows that the oscillators are diverging, not confirming the new lows in price.

Finally, we have the monthly chart:

At the end of February, SPY completed a TD Sequential Buy Setup (HT, Randy). Hence all three time frames are now aligned with Buy Signals.

Now this is only one type of indicator. However, combined with all the other factors currently aligning I would be surprised if we didn’t see a major stock market rally over the next few months and, perhaps, the beginnings of a new bull market.